The Coronavirus disease (COVID-19) impact on life insurance companies are more likely to result from adverse market movements than increased claims, said Canadian credit ratings DBRS Morningstar on Thursday.
The outbreak will likely affect the companies in terms of adverse movements in the financial markets, including declines in bond yields, equity markets, reducing profitability, business interruption and potential impact on revenues. There could also be increased incurred claim costs, including death and disability claims and drug costs, the rating agency said in a press statement.
Although most countries have had minimal reported coronavirus cases so far, and consequently the impact on claim costs for life insurers is negligible to date, the impact on business operations for some global insurers has already surfaced, particularly for those operating in high-risk regions such as China, Iran, and Italy. Most life insurers expect to feel the impact of coronavirus on the financial markets because of the highly interlinked global economy, the agency said.
The agency added that life insurers have large invested asset portfolios comprising mainly fixed income. However, they may also include equities and real estate. As coronavirus continues to spread across the globe, financial markets have taken a negative view, resulting in a drop in bond yields as well as a steep drop in most equity markets.